In the best year for the freight transportation industry since the Great Recession, logistics managers chalk up efficiencies that drive further U.S. economic growth. However, capacity issues persist, causing shippers to worry about rate hikes as carriers continue to be meticulous in their partnerships.

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An improving market in the trucking sector is apparent, according to the most recent edition of the Trucking Update from FTR Associates, a freight transportation forecasting firm.

FTR said that its Trucking Conditions Index (TCI), which is a compilation of factors affecting trucking, ticked up to 9.1 in January from December’s 7.1, adding that the TCI has seen steady gains since last October.

The TCI is comprised of various metrics, including capacity, fuel, bankruptcies, cost of capital, and freight.

According to FTR, continued economic growth, coupled with the impact of new safety regulations, will result in sufficient freight to stress capacity sustaining an upward trend in the TCI through the middle of 2012.

In an interview with LM, FTR President Eric Starks said various components of the trucking sector are moving in the right direction.

“The biggest thing here we are looking at is that this will accelerate expectations for the market,” said Starks. “If we are expecting to stay at the levels we are talking about, then it would be a good environment for the trucking industry and be something shippers can handle. But as this accelerates and moves higher, shippers are going to have a much tougher time.”

Drivers for a potentially tougher road ahead for shippers include increasing fuel prices, and tighter capacity, which could me a major issue as the year progresses.

Fluctuations in fuel prices by and large will not be a huge issue for truckers as they can pass those charges through to shippers, said Starks. But for the shipper, he said will be a major issue as they absorb, all—or a substantial portion—of those costs.

“You could potentially see shipper rates up 20-to-25 percent compared to what they were paying last year,” said Starks. “That would come from fuel costs, as well as increased base rates, with this type of rate increase being difficult for anyone to absorb.”

The current trucking environment is beginning to resemble how the market was in 2004, said Starks, with conflicts in the Middle East serving as a wildcard, which could create instability.

In 2004 and back to the middle of 2003, Starks explained that market conditions began to accelerate and gained momentum during the first quarter of 2004.

“Things happened quickly in a six-month timeframe, making it difficult for the industry to respond in an orderly fashion,” said Starks. “So what you saw was a bit of a perfect storm, with everything tightening on the capacity side for all modes being able to meet the needs of the shipping environment at that point. It was one of those things, which was difficult for all of the right reasons. Shippers themselves had a lot of demand with some artificial things baked in there. This time we are seeing a decent amount of freight, but there are also some issues with the regulatory environment that are going to constrain capacity.”

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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